Monday, April 4, 2016

[DIGEST: The Guardian, BBC, USA Today]A huge leak of controversial
documents has shed new light on how the super wealthy take advantage of
secretive offshore accounts. The Panama Papers, a leak of 11 million
documents and 2.6 terabytes of information from the databases of
Panamanian offshore law firm Mossack Fonseca, is the largest data leak
since Edward Snowden gave secret intelligence to journalists in 2013.
French President Francois Hollande celebrated the release, claiming it
would “increase tax revenues from those who commit fraud.”

An anonymous source obtained the documents before turning them over to the Munich based newspaper Süddeutsche Zeitung,
which shared them with the International Consortium of Investigative
Journalists (ICIJ), which in turn shared them with its network of
international partners, including the BBC. Gerard Ryle, director of the
ICIJ, said
the documents illuminated Mossack Fonseca’s business practices over the
last 40 years. “I think the leak will prove to be probably the biggest
blow the offshore world has ever taken because of the extent of the
documents,” he said. Currently, 109 media organizations in 76 countries
are analyzing the documents.The Panama Papers show the previously
undisclosed offshore financial records of celebrities, sports stars and
even world leaders. The documents implicate 143 politicians (including
12 heads of state) with family members and associates known to use
offshore tax havens. Leaders implicated include
Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime
minister; Argentinian president Mauricio Macri; Petro Poroshenko, the
president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and
Sigmundur Davíð Gunnlaugsson, the prime minister of Iceland. The files further reveal a $2 billion
money laundering ring leading to Russian President Vladimir Putin. A
friend of Putin’s, cellist Sergei Roldugin, stands at the center of the
scheme; one money trail leads to a ski resort where Putin’s daughter,
Katerina, held her 2013 wedding.

At least 33 people and companies featured in the documents are on a U.S. government blacklist for links
to wrongdoing, including, but not limited to, doing business with
Mexican drug cartels, terrorist groups and nations cited for
questionable human rights records, such as North Korea and Iran. In an
ironic twist, many of the world leaders and associates appearing in the documents ascended to public office through publicly championing anti-corruption platforms.Mossack Fonseca offers a multitude of
services, including investor advisory and wealth management, operating
in tax havens like Switzerland and the British Virgin Islands. The
company is the world’s fourth largest provider of offshore financial
services. The global network, according to its website,
consists of 600 employees across 42 countries. The company denies all
allegations of criminal activity, insisting its business record is
beyond reproach. “Our services are regulated on multiple levels, often
by overlapping agencies, and we have a strong compliance record,” the
company said in a statement.
“In addition, we have always complied with international protocols… to
assure as is reasonably possible, that the companies we incorporate are
not being used for tax evasion, money laundering, terrorist finance or
other illicit purposes. We are responsible members of the global
financial and business community.”

Mossack Fonseca mostly acted on
instructions from intermediaries, such as accountants and lawyers,
rather than deal directly with company owners. Funds transfer between
shell companies, which facilitate financial transactions while lacking
significant assets or operations. This is not technically illegal or
extraordinary, but businesses might place assets offshore to guard
against government raids or circumvent currency restrictions.Investigators often face difficulty
ascertaining where the leaked offshore money originated because the
actual owner can hide behind a nominee–someone with no real control and
with no assets at stake who simply lends a signature. A sample
of 13,000 owners compiled by Mossack Fonseca indicates that Russia and
China top the list. Other countries, among them Hong Kong, Switzerland,
the United Kingdom and the United Arab Emirates, also prominently
feature in the leaked data.

It is still too early to tell what the
legal fallout could be for those involved, as laws vary from country to
country. Whether international conventions were violated or whether
money can be seized remains to be seen. But already there is political
fallout: Prime Minister Sigmundur Davíð Gunnlaugsson faces strong
criticism and calls for a snap election as Iceland is rocked by the scandal.
Confronted by the revelations, he remained defiant. “You are asking me
nonsense. You trick me into an interview under false pretenses,”
Gunnlaugsson told interviewers. “This is totally inappropriate.”